In recent months, the lithium industry has been experiencing a resurgence, evidenced by a marked increase in the stock price of Tianqi Lithium, which has appreciated significantly—a welcome development after a prolonged downturn that lasted over two years. Since late September, the company’s stock has surged from around 25 yuan to approximately 43 yuan, reflecting a remarkable gain of over 70%. While this increase may not be the most impressive on the broader A-share market, it certainly feels like a breath of fresh air for investors who have been weathering a long drought.This recent price spike prompts the question: is this an opportune time for investment, reminiscent of 2020 when Tianqi Lithium's stock saw an impressive increase of nearly eight times within a single year? However, it is crucial to note that the recent uptick in stock prices is not merely a product of market sentiment; rather, it stems from a complex interplay of economic factors.At the heart of the lithium market are the prices of lithium carbonate, a key metric that drives the performance of lithium mining companies. Just last month, lithium carbonate futures dropped below 70,000 yuan per ton. Yet by November 14, that figure rebounded to 85,000 yuan, marking a recovery of over 25% from its lows. This leads to a tantalizing inquiry: has spring truly arrived for the lithium sector?To better understand the market dynamics, it is important to consider two significant dimensions. The first is identifying the bottom range of lithium carbonate prices. Globally, lithium resources are predominantly sourced from salt lakes, spodumene, and lepidolite, with spodumene representing nearly half of the total supply. The production costs associated with lithium carbonate vary significantly according to the type of lithium ore and the mining technologies employed by different companies.For context, the cost of extracting lithium from spodumene typically ranges between 60,000 to 90,000 yuan per ton, while costs for lepidolite are slightly higher and salt lake production generally falls below 50,000 yuan. This year, Tianqi Lithium’s production cost for lithium carbonate is reported to be around 60,000 yuan per ton. In April, another company revealed that its lithium carbonate production cost had dipped below 60,000 yuan per ton. This illustrates a crucial threshold for the industry; when lithium carbonate prices fall below 70,000 yuan, most lithium mining companies face financial distress and respond by curtailing production to mitigate losses.Indeed, various mining companies have taken steps to reduce capacity in response to low prices. For instance, on October 30, the Australian firm Pilbara Minerals announced plans to place its Ngungaju plant in maintenance mode, effectively reducing its lithium concentrate output by 100,000 tons for the 2025 fiscal year. Similarly, Liontown has implemented its own production cutbacks, and Albemarle, the world’s largest lithium producer based in the United States, has abandoned its expansion plans.Conversely, it’s important to highlight the gradual recovery in demand. As of October this year, global sales of new energy vehicles surged by 35% year-over-year, with China experiencing an even more notable growth rate of 54%. The energy storage market is also witnessing robust demand, with players both domestic and international rushing to enhance their installations. Supported by these developments, battery manufacturers have ramped up their production schedules, with leading companies operating at full capacity and rumors suggesting accelerated expansion of production in the coming year.The revival of demand, combined with the production costs hovering around the 70,000 yuan region, indicates that this price point might very well represent the lower limit for lithium carbonate prices.Next, it’s essential to evaluate the potential upside for lithium carbonate prices. At the tail end of 2022, lithium carbonate prices surged past the 600,000 yuan mark, only to plummet below 100,000 yuan over the following year—a staggering overall decline of more than 80%. Many investors now believe that if a price rebound is established, the potential for upward movement could be substantial.Yet, to assess this notion effectively, we must consider why lithium carbonate prices rose sharply in the first place: an inability to rapidly scale up production in response to immediate demand. However, as production capacities have expanded significantly during the recent cycle, estimates indicate that global lithium carbonate production capacity could exceed 2 million tons by 2024, while corresponding demand might only reach about 1.08 million tons.Let’s take this a step further by examining the situation in South America. Bolivia, Argentina, and Chile make up what is known as the “Lithium Triangle” and contain around 65% of the world's lithium resources. Although historically limited by technological and financial barriers, these countries are now beginning to unlock their vast lithium potential, spurred by soaring prices. For example, in April 2023, Chile unveiled its national lithium strategy, aimed at encouraging the expansion of lithium mining and processing operations. Notably, Chile boasts known lithium reserves of nearly 10 million tons, yet its lithium carbonate production remains relatively low at around 27,500 tons annually even after significant increases.This situation begs the question: if lithium carbonate prices were to rise again by 100,000 or even 200,000 yuan, would these countries not significantly increase their production capacities?On the domestic front, the scenario mirrors this trend. In August 2022, CATL secured mining rights for the Yichun Jiashe lithium mica mine, which is recognized as the largest lithium mica mine in Yichun—boasting a lithium carbonate equivalent of approximately 6.57 million tons. However, due to its lower grade, CATL’s production costs sit at a high 90,000 yuan per ton, making it less competitive compared to most lithium miners. Consequently, when prices dipped below 100,000 yuan, whispers of production cuts from CATL were pronounced. But should lithium carbonate prices climb back over that threshold, the company may reconsider restoring its output.Here we arrive at a critical conclusion: while demand for lithium from electric vehicle manufacturers and energy storage applications remains significant—coupled with emerging opportunities from sectors like the low-altitude economy and robotics, the reality remains that when lithium carbonate prices fall below production costs, mining companies will adjust their operations accordingly to reduce capacity; conversely, when prices exceed production costs, restoration of capacity will follow, with the increase fostering even more supplies.It is important to note that lithium itself is not a limited resource. Unlike oil, which is depleted once extracted, lithium resources can indeed be recycled and reused. Simply put, the current uptick in the lithium market may be more accurately classified as a rebound from an overstretched position; should lithium mining firms merely focus on selling raw resources, they may never regain their former glory.